USD to extend recent gains? - Westpac

The background of a likely glacial wind down to the ECB’s asset purchase program along with continued repricing of Fed expectations amid relatively hawkish signaling of late (e.g. Yellen: “my best guess is that these soft (inflation) readings will not persist”) should sustain USD uptrend near term, according to Richard Franulovich, Research Analyst at Westpac. 

Key Quotes

“Key uncertainties near term include Trump choice for Fed Chair:  Powell and Yellen likely to see a mild pullback in the USD and yields while Taylor or Warsh should see US yields and the USD extend recent gains.”

“Accommodative financial conditions point to yet more upside surprises in coming months, adding to the USD’s tailwinds, but there’s also a likely major setback at some point when it becomes clear that political, procedural and fiscal obstacles will guide Congress toward much smaller tax cuts.”